World’s Top Three Cruise Lines Accumulate Over $60 Billion in Debt

The year 2020 was unforgiving for cruise lines but 2021 seems to have started off on a slightly higher note. For the top three industry players, surviving the year took its toll resulting in a high level of cash burn and massive debt burdens.

According to the research data analyzed and published by ComprarAcciones.com, Norwegian Cruise had accrued a total debt burden of $12.15 billion at the end of 2020. The company had reported $11.3 billion in debt at the end of Q3 2020. It went on to issue senior notes worth $850 million in December 2020.

For the third quarter of 2020, the company had announced a monthly cash burn rate of $150 million. That would imply an annual cash burn of $1.8 billion. On the bright side though, it has $2.7 billion in debt refinancing over the coming three years.

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On the other hand, Carnival Corporation announced total debt amounting to $24.9 billion as of August 2020. It raised close to $20 billion via share and debt offerings by the end of the year. At the end of November though, liquidity stood at $9.5 billion.

As of February 2021, the total debt figure had risen to $30 billion. In that one month, it raised $3.5 billion in a debt offering, announcing plans to raise a further $1 billion. Additionally, the company has $4.2 billion in debt refinancing that is due within 24 months. During Q4 2020, it had estimated a monthly cash burn rate of $530 million.

As of September 2020, Royal Caribbean had a debt burden of $18.95 billion. Its interest expense for the first nine months of the year totaled $258 million. On an annualized basis, that would translate to around $344 million.

In 2020, it raised $9.3 billion in new capital. These came from debt offerings as well as a stock sale of $1 billion in December 2020.

In total, the three cruise giants have accumulated more than $60 billion in debt so far over the pandemic period. The figure is expected to increase further as they prepare to retake the seas.

Royal Caribbean Bookings Up by 30% in 2021

On the bright side though, analysts and stakeholders expect 2021 to be the year of recovery for the battered industry.

According to Royal Caribbean Group executives, there has been an uptick of 30% in future bookings since the start of the year, as compared to November and December 2020.

In response to the bullish report, analysts raised their price targets on the stock sending it on an upward trajectory. Deutsche Bank raised its target from $62 to $79, while JP Morgan went from $91 to $100.

As a result of the positive sentiment, Royal Caribbean share price and that of other cruise stocks surged upward. According to data from Marketwatch, Royal Caribbean shares are trading at $82.45 as of March 24, 2021.

Over the previous three months, its stock price has jumped by over 14%. The share price is also up by 92.36% over the one-year period, a remarkable feat considering it sank by 44% in 2020.

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Similarly, Carnival Corporation and Norwegian Cruise Lines have been on an upward trajectory since the start of 2021. Carnival stock is trading at $25.40 at the time, up by 18.67% over the previous three months and by 59.81% over the one-year period. Norwegian Cruise Lines is trading at $25.79, up by 2.97% over the previous three-month period and 61.11% over the one-year period.

While the uptrends have a correlation to the positive commentary from Wall Street, they are also a signal of good news to come.

Carnival Corporation Revenue to Shoot Up by 13.6% in FY21, 227.4% in FY22

For the fourth quarter of 2020, Royal Caribbean had a net loss of $1.37 billion. The figure sent its annual loss to $5.8 billion against $2.2 billion in revenue.

The company’s Q4 2020 revenue underperformed analyst expectations, at $34.1 million against the expected $35.6 million. That was a far cry from its Q4 2019 figure of $2.52 billion. Loss per share was $5.02, versus the anticipated $5.20.

Meanwhile, Carnival Corporation posted a net loss of $2.2 billion during its fiscal Q4 2020, which ended in November 2020. Norwegian Cruise Lines is yet to report earnings but the company lamented that 2020 was the most difficult year in its five decades of operation.

According to analyst projections, Carnival, the largest of the three cruise lines, will see revenue rise by 13.6% in fiscal 2021. In 2022, the increase will be a remarkable 227.4%.

For the world’s second largest cruise company, Royal Caribbean, analysts project an upside of over 80% for stocks post-COVID.

However, the outlook is pessimistic for Norwegian Cruise Lines, with revenue expected to fall by 67.8% in 2021.